EFTA Sanctions Liechtenstein's IP Tax Breaks

14.06.2011

The European Free Trade Association Surveillance Authority (ESA) has recently approved a scheme for tax deductions in respect of intellectual property rights in Liechtenstein.

According to the Authority, the scheme, which allows 80% of the income derived from intellectual property rights to be claimed as a deductible expense prior to the imposition of corporation tax, is compatible with European Economic Area (EEA) rules.

Defending its ruling, ESA explains that: “The Authority considers that no aid is involved as the tax deduction is available to all businesses, irrespective of size, legal structure and sector. Therefore, the scheme does not favour any product or services.”

Liechtenstein’s Prime Minister and Finance Minister Klaus Tschütscher welcomed the decision, extolling the fact that the Principality’s special tax regime pertaining to intellectual property rights guarantees on the one hand the attractiveness of Liechtenstein as a location for innovative companies and on the other serves to strengthen legal certainty for research companies in Liechtenstein, presenting a particular advantage.

In its release, the Liechtenstein government points out that it elected to notify ESA of the provisions contained in the country’s new tax law pertaining to the taxation of intellectual property rights. The government initiated this step, it stresses, not only for reasons of legal certainty but also to confirm that the provisions are indeed in accordance with European law.

Concluding his remarks, Tschütscher emphasized that ESA’s ruling confirms that the comprehensive reform of the Principality’s taxation is indeed in accordance with the current requirements of EEA regulations. Here, Tschütscher alluded not only to ESA’s latest ruling on intellectual property rights, but also to the authority’s similar findings back in February as regards private wealth structures in Liechtenstein, which guaranteed a clear legal certainty both to financial intermediaries and to customers of the Principality’s financial centre. As a result, the country’s innovative industry is both supported and strengthened, he added.